BI and economic risks top agenda finds AGCS survey

The experts were asked to identify the risks they expect to trouble companies most during 2012. The most frequently mentioned risk for companies around the world was economic risk (21%) such as a recession, the sovereign debt crisis and foreign exchange effects. "In the current climate we have all become acutely aware of the pervasiveness of economic risks," Allianz Chief Economist Michael Heise said.hide"Nervousness and volatility in the financial markets eventually undermine confidence and business activities in the real economy, which in turn further unsettles investors and the markets. Risk assessment is a crucial element in all our personal and business decisions," he continued. The risk experts surveyed by AGCS ranked business interruptions second (14%). Companies reduce costs by purchasing on a global scale, increasing outsourcing to suppliers and just-in-time production. This also renders them vulnerable to process interruptions. The risk experts said that this was particularly relevant in production and operational risk management. "There has been an increasing trend to source globally in order to reduce costs ever further, all along the chain," said Paul Carter, Head of Property Risk Consulting at AGCS. "This has become the dominant economic model, but its success has been achieved at the expense of a significantly increased risk of disruption within companies' overall supply chains," he added. Natural catastrophes were ranked as the third (9%) greatest business risk. According to the respondents, companies neglect the danger of cyber risks. Only 1% of the risk engineers that took part in the survey think that IT and cyber crime is a key client concern to companies. One of the reasons for this may be that IT risks are quickly evolving and becoming more complex by the minute, said Jose Fidalgo, Risk Consultant Liability at AGCS. "There is a lack of understanding about the entire process," he said. The survey indicates some regional differences in the assessment of risks. While experts in Asia mainly fear natural catastrophes, German specialists are especially concerned about business inherent risks such as the faulty design of production processes and the increasing complexity of projects and organisations which can lead to a series of claims (13%). One example of this is the wind power industry, explained Gerhard Müller, Senior Risk Consultant at AGCS. "Claims to do with rotor blades or generators can have severe consequences and result in high costs, because German offshore parks are particularly far away from the coast. Because of bad weather conditions, these parks cannot be reached for days or even weeks," he said. Heavy-duty devices are needed to conduct special repairs and these are located on special vessels with cranes. Regulations on how far the parks must be located from the coast are stricter in Germany than in Denmark for example. "This requires deeper water and more complex construction and repair procedures," Mr Müller pointed out. In return, German specialists are less worried by regulatory issues such as over-regulation and compliance challenges (9%) than their colleagues in the UK (14%). "The results of the survey will be integrated in the development of risk scenarios and new products," Michael Bruch, AGCS Risk Consultant said. "Business interruption is one of the top business risks; this confirms our clients' feedback. As a result we can invest in the development of cover against business interruption without preceding property loss," he added. · Mr Bruch and Mr Hewitt are speakers at CRE's upcoming Risk Frontiers - Emerging Risks seminar at the Grange City hotel in London on February 15. There are very few spaces remaining at this popular event so risk managers should register quickly. CRE will publish a full report on the matters discussed during the event—including the economic outlook, reputational and cyber risk and power blackouts—in April to be distributed with the monthly hard copy CRE newspaper. To register for the event and newspaper please contact Hugo Foster at HFoster@commercialriskeurope.com

BI and economic risks top agenda finds AGCS survey

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